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Alphabet announces $80B equity capital raise to expand AI infra and compute

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Re: Alphabet announces $80B equity capital raise to expand AI infra and compute

#221

Post by anthonypasq »

okdood64 wrote: post #219
bel8 wrote: post #17

Earlier quoted context omitted.

They know Google has a ton of data to train LLMs on. Recently I have been asking YouTube's new AI about some videos ("when is Steam metrics mentioned in the video?" for example), which means they also index videos. This is an unthinkable amount of data. I'm actually impressed at how bad Alphabet is with LLMs since they invented the thing as we know AND have all the data to train on, yet OpenAI and Anthropic are eatin…

> yet OpenAI and Anthropic are eating their pie I'm actually impressed by how much the Hackernews crowd is sleeping on Google & Gemini. Yes, it's lagging behind in coding, but it's consistently much better and more reliable at literally everything else. Also there was a period of time when Gemini was the best model out there...

[dead]

Re: Alphabet announces $80B equity capital raise to expand AI infra and compute

#222

Post by surajrmal »

marcus_holmes wrote: post #136
wrsh07 wrote: post #130

Earlier quoted context omitted.

This is a sensible-seeming take at first blush, but it doesn't hold up to any scrutiny (or maybe my scrutiny is faulty - you tell me!) Sundar and many of his executives have certainly read or heard of The Innovator's Dilemma, and I expect they're all moderately paranoid that it will be their downfall. Also, that's not it. Google has a great ai app called Gemini where they have at various points hosted the top ai imag…

I heard Google search volumes by humans were declining, but I can't find the reference now so may be wrong. It's definitely changing the entire SEO industry. Are they actually implementing ads in chat yet? I haven't seen an ad in Gemini yet. Again, the results I've seen is that LLM results in search have resulted in more zero-click searches (as a proportion of all searches), which isn't increasing engagement? But aga…

Google search related ad revenue is still going up. Volume isn't everything. Personally, as llms have gotten better I do more and more product research on Google.

Re: Alphabet announces $80B equity capital raise to expand AI infra and compute

#223

Post by surajrmal »

thefounder wrote: post #168
marcus_holmes wrote: post #136

Earlier quoted context omitted.

I heard Google search volumes by humans were declining, but I can't find the reference now so may be wrong. It's definitely changing the entire SEO industry. Are they actually implementing ads in chat yet? I haven't seen an ad in Gemini yet. Again, the results I've seen is that LLM results in search have resulted in more zero-click searches (as a proportion of all searches), which isn't increasing engagement? But aga…

Even if they include ads in Gemini the issue is that Gemini is not the best AI app. It’s maybe the 3rd or 4th. So if Google becomes the 3rd best “search/AI engine” the future is not that bright.

Search's AI mode is by far the most popular "AI app". Most of the time I don't end up using Gemini, it's because search's AI mode is good enough for my needs and I use it out of habit. I imagine a lot of other would-be Gemini users are in similar shoes.

Re: Alphabet announces $80B equity capital raise to expand AI infra and compute

#224

Post by lern_too_spel »

marcus_holmes wrote: post #119
bel8 wrote: post #17

Earlier quoted context omitted.

They know Google has a ton of data to train LLMs on. Recently I have been asking YouTube's new AI about some videos ("when is Steam metrics mentioned in the video?" for example), which means they also index videos. This is an unthinkable amount of data. I'm actually impressed at how bad Alphabet is with LLMs since they invented the thing as we know AND have all the data to train on, yet OpenAI and Anthropic are eatin…

Kodak problem. Kodak invented the digital camera but their revenue came from making photographic film. They were unable to take advantage of their invention because it would cannibalise their revenue. That didn't stop other people and the revenue died anyway. Google's main revenue is ads based on search. LLMs are a competitor to search. Creating better LLMs will cut into search volumes. In any large organisation this…

These people know about the innovator's dilemma. Their problem is incompetent product and people management, same as it has always been. Talk to anybody working on Gemini, and it's obvious that they're wasting a tremendous amount of effort and talent.

Re: Alphabet announces $80B equity capital raise to expand AI infra and compute

#225

Post by collingreen »

mandeepj wrote: post #125
SOLAR_FIELDS wrote: post #118

Earlier quoted context omitted.

If your product becomes commoditized, it’s no longer a high margin business

> If your product becomes commoditized Depends on the product - whether protein bars, salty chips, cellular service, or IPhone or something else. If your product has a flavor, it’s never going to get commoditized. Coke still tastes better than Pepsi.

This is the power of a brand. Kirkland and some private label products are literally the same as the competitor products and yet are perceived differently. Even in your Pepsi vs Coke example, Pepsi routinely wins in blind taste tests but there are more "Coke people".

It will be interesting to see if the LLM companies can establish their own "brand" and how they will do that. LLM voice is a thing but not sure if it's a good thing people will use to hang their self identity on. Distillation of models and constant training also make this complicated. Claude code is winning on harness and ux right now but it seems precarious and also easy to commoditize. I think elon tried to add branding to his chatbot pretty intelligently by being iconically crude/evil/"anti woke" since it's both highly visible and less likely to be copied.

We live in fascinating times!

Re: Alphabet announces $80B equity capital raise to expand AI infra and compute

#226

Post by mgfist »

lukeschlather wrote: post #59
mgfist wrote: post #44

Earlier quoted context omitted.

This makes no sense. Google is beholden to its own shareholders, not the markets at large. In any case, it's well known that devs in Google have liked anthropic/openai models for coding more than gemini, so unless they're hiding their best models from the people within, I think it's just the case that they're behind.

Coding is a pretty small slice of the markets in play. Google's models are driving cars right now. Using coding agents doesn't give much insight into performance in the broader world; I would assume assume Google is performing better in general even if Claude or Codex is currently outperforming for coding.

> Coding is a pretty small slice of the markets in play.

I don't think that's true, mostly in that a lot of usecases are solved via coding models + a harness.

> Google's models are driving cars right now.

Yes + other models like alphafold. But those are (relatively) specialized models. Besides, the comment I was responding to was saying Google is sandbagging the market to keep it calm or something. I don't disagree that Google is doing well overall and has some clear advantages

Re: Alphabet announces $80B equity capital raise to expand AI infra and compute

#227

Post by tguedes »

exabrial wrote: post #133
missedthecue wrote: post #128

Earlier quoted context omitted.

If they can issue shares at ~30x earnings and deploy it in an accretive way, what is the argument against doing this? It's incremental ROIC below your cost of capital. One of the smartest things you can do in business.

But why finance it at all if you have (I assume) the cash laying around? That seems a tad risky if the bet doesn't work out. Not nitpicking your answer, I just don't understand.

They don't have the cash laying around. Their "actual" profit, meaning money added to their bank account after stock buy backs, dividends, employee stock allocations, and capex was $7B.

In this statement, their 2025 capex was $91.45B. They expect their 2026 capex to be $180B-190B. And they expect their "2027 capital expenditures to significantly increase compared to 2026."

So they simply don't have the money. Up until now, I thought the bubble talks about AI were silly because all these companies were using cash flow to fund their capex. These numbers are so astronomical now that a company that had $132B in net income has to take debt or issue stock to pay for it.

Re: Alphabet announces $80B equity capital raise to expand AI infra and compute

#228

Post by gls2ro »

wrsh07 wrote: post #130
marcus_holmes wrote: post #119

Earlier quoted context omitted.

Kodak problem. Kodak invented the digital camera but their revenue came from making photographic film. They were unable to take advantage of their invention because it would cannibalise their revenue. That didn't stop other people and the revenue died anyway. Google's main revenue is ads based on search. LLMs are a competitor to search. Creating better LLMs will cut into search volumes. In any large organisation this…

This is a sensible-seeming take at first blush, but it doesn't hold up to any scrutiny (or maybe my scrutiny is faulty - you tell me!) Sundar and many of his executives have certainly read or heard of The Innovator's Dilemma, and I expect they're all moderately paranoid that it will be their downfall. Also, that's not it. Google has a great ai app called Gemini where they have at various points hosted the top ai imag…

The thing about Innovator's Dilemma is that even if you know about it you mostly cannot escape your own company culture and norms.

If there is a "crack" there you might be able to get out of it, or it will let a disruptive idea to grow, but my way of thinking about innovator's dilemma is that is it a "culture bias": knowing about it give you some small advantage but it needs a real change to maybe have a chance to escape/act on it and the most important part is that under pressure it will quickly and imperceptible run the entire process or decision making.

Re: Alphabet announces $80B equity capital raise to expand AI infra and compute

#229

Post by keeda »

wrsh07 wrote: post #220
keeda wrote: post #153

Earlier quoted context omitted.

I agree that all of today's CEOs have learned from history and are paranoid about disruption, and I agree that Google is pivoting effectively and will even thrive in the AI era, given their technical and distribution advantages... but I think their revenues and profits and dominance will be much lower than what they are today: https://news.ycombinator.com/item?id=47957708

This take overlooks most of the work that Google has been doing in the past decade. Have you seen their Cloud business? Moreover, Google has continued to drive search growth since ChatGPT arrived and is executing competently. Their models are good (not great), but they have enough compute and one of the best ML-focused chips such that they aren't beholden to Nvidia (instead, they're beholden to fabs: tsmc - this is a…

Right, but my theory is that the ad business, still the biggest chunk (75%+) of their revenue, is extremely hyper-optimized for the current search journey-based UX and enjoys a monopoly + auction rigging premium (e.g. Project Bernanke) primarily through tremendous ad volume. That is, their current growth is largely based on stuffing more and more ads into commercial-intent SERPs.

However the agent-based conversational future simply does not support that level of valuable [1] ad volume, which collapses Google's carefully optimized tech+business stack.

Like I said, they will still thrive, but more because of GCP (which might see the biggest growth due to AI and the other tech + infrastructural advantages you mentioned) and the other businesses (YouTube, Waymo, etc.) However, their current cash cow is being disrupted, primarily by themselves, and I don't yet see how they can monetize agents nearly as lucratively as they've monetized search.

[1.] Sure, they could keep stuffing ads into each turn of the conversation, but 1) as I theorized in the linked post, those would be meaningless and low-value, and 2) that could just push users to competitors like ChatGPT, Anthropic or Perplexity that can offer a cleaner UX because they're starting from a clean slate and don't (yet) have the same revenue expectations to meet.

Re: Alphabet announces $80B equity capital raise to expand AI infra and compute

#230

Post by exabrial »

missedthecue wrote: post #139
exabrial wrote: post #133

Earlier quoted context omitted.

But why finance it at all if you have (I assume) the cash laying around? That seems a tad risky if the bet doesn't work out. Not nitpicking your answer, I just don't understand.

Offering shares doesn't introduce balance sheet risk like debt does. There is no interest expense. You dilute the shareholders by about 1.67% but if this $80b can be deployed in a way that increases the value of the firm by more than that amount over the long term, it creates value and makes everyone better off, including the diluted shareholders. The risk if it doesn't work out is that everyone gets diluted 1.67%

Hh I didn't consider that. Produce more shares, have Berkshire buy them up at a lower price than the public, in exchange for capital right now. Berkshire can sell them for a profit later or participate in earnings. And with their shares at a premium right now, great time to do it.
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